Treasury Department Nominee Skipped Taxes

WASHINGTON (AP) - President-elect Barack Obama's choice to runthe Treasury Department and lead the nation's economic rescuefailed to pay $34,000 in taxes from 2001 to 2004, but thelast-minute disclosure didn't stop Senate Democrats from movingforward with his nomination. Timothy Geithner had paid some of the back taxes in 2006 afterthe IRS sent him a bill. When the Obama transition team discoveredhe owed even more back taxes, Geithner paid those additional taxesdays before Obama announced his choice in November, according tomaterials released by the Senate Finance Committee considering hisnomination. Obama's staff told senators about the tax issues on Dec. 5. Finance Committee Chairman Max Baucus, D-Mont., said he stillhoped Geithner could be confirmed on Inauguration Day, askingsenators for unanimous consent to skirt rules and schedule ahearing as early as Friday. "These errors were not intentional; they were honestmistakes," Baucus said after he and other committee members metwith Geithner behind closed doors on Tuesday. It was not clear Tuesday whether committee Republicans wouldsign off on Baucus' request for a quick hearing. The panel's senior Republican, Sen. Chuck Grassley of Iowa,hasn't decided whether the revelations are reason enough to opposeGeithner, said spokeswoman Jill Kozeny. He believes they are"serious, and whether or not it's disqualifying is to bedetermined," she said. Another prominent Republican, however, spoke up for Geithner.Utah Sen. Orrin Hatch, another committee member, said he continuesto support the nominee. "I have no problem," Hatch told Fox News. "He's a very, verycompetent guy." After senators met with Geithner, the panel released 30 pages ofdocuments detailing his tax errors - and also how he came to employa housekeeper whose legal immigrant work status had briefly lapsedin 2005. Senate Majority Leader Harry Reid, D-Nev., dismissed the eventsas "a few little hiccups," and said he was "not concerned atall" about the impact. Obama reiterated his support for Geithner. "He's dedicated his career to our country and served withhonor, intelligence and distinction," incoming White Housespokesman Robert Gibbs said. "That service should not be tarnishedby honest mistakes, which, upon learning of them, he quicklyaddressed." Geithner, plucked from his job as president of the FederalReserve Bank of New York to serve as Obama's treasury secretary,told transition officials and senators that he didn't know he owedself-employment taxes when he worked for the International MonetaryFund. He failed to pay self-employment taxes for money he earned 2001to 2004 while working for the IMF, according to materials releasedby the Senate committee. In 2006, the IRS notified him that he owed$14,847 in self-employment taxes and $1,885 in interest from 2003and 2004, which he paid after an audit. The IRS waived penaltiesfor those tax years. Transition officials discovered last fall that Geithner also hadnot paid the taxes in 2001 or 2002. He paid $19,176 in back taxesand $6,794 in interest for 2001 and 2002 several days before Obamaannounced his choice, the committee documents showed. All told,Geithner had failed to pay $34,023 in self-employment taxes for theyears 2001 to 2004. Geithner and his supporters have said his mistake was a commonone for people hired by international organizations that don't paythe employer share of Social Security taxes. The IRS estimated in2007 that as many as half those employees had made tax-filingmistakes, and offered a group settlement to let them correct theerrors. Geithner told Obama's team and senators that an accountanthad reviewed his tax returns after Geithner prepared them anddidn't discover the problem. But some tax experts said the problem is not that common. Tom Ochsenschlager, vice president of tax for the AmericanInstitute of Certified Public Accountants, said it would bedifficult for someone preparing a tax return for a self-employedperson to skip the Social Security and Medicare tax lines. "It's such a basic mistake that I kind of wonder if we know allthe facts," Ochsenschlager said of Geithner's situation. Geithner filed amended tax returns for 2001 through 2006 afterObama's team reviewed his records. The committee's materials said Geithner "has experience withSocial Security tax issues." He filed the taxes late for hishousehold employees in 1996 for years 1993 to 1995; he incorrectlycalculated Medicare taxes for his household employees in 1998 andreceived an IRS notice; and he received notices from the SocialSecurity Administration and the IRS after not filing 2003 and 2004forms for his household employees, the report states. Geithner also said he didn't realize a housekeeper he paid in2004 and 2005 did not have current employment documentation as animmigrant for the final three months she worked for him, thedocuments indicated. One of his housekeepers' legal authorization to work in theUnited States expired on July 15, 2005, and the person continued towork for Geithner until October of that year, the committee'sreport states. Geithner is the second Obama Cabinet choice to face controversy.New Mexico Gov. Bill Richardson withdrew his name on Jan. 4 asObama's commerce secretary after questions surfaced about a federalinvestigation concerning contributions and a state contract. Geithner's tax problem was at least the second time such asituation has touched an Obama appointee. Nancy Killefer, themanagement consultant selected last week to become the newadministration's chief performance officer, failed to payunemployment compensation taxes, apparently on household employees.In 2005, the District of Columbia placed a $946.69 tax lien on herhome over the unpaid taxes. Over a year and a half, she had failedto pay $298 in taxes plus the rest in interest and penalties, andshe cleared up the debt within a few months.

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